Boost Cash Flow with Accounts Receivable Automation
By Morgan Martinez
Most lawyers don’t get into law expecting to tackle accounts receivable management. However, addressing unpaid client bills is unavoidable for nearly every firm. That’s where an automated accounts receivable system comes into play.
This article covers how automating the collections process can help you get paid faster without wasting time on invoice follow-up. We’ll also cover the best practices for collecting accounts receivables and improving your staff’s utilization rate (the amount of time staff spends on billable tasks vs. non-billable work) and your firm’s realization rate (the number of paid hours out of total hours worked)
What is Law Firm Accounts Receivable Management?
Accounts receivable are the payments that you haven’t collected from clients. This includes invoices that have been sent but aren’t yet due—as well as overdue bills.
Staying on top of these accounts is important, as they represent revenue for your law firm. Unfortunately, the process can be very time-consuming and complex, especially when done manually. In fact, in the MyCase 2021 Legal Industry Report, 73% of surveyed lawyers stated that their firm struggles to get paid. And 80% claimed that law firm profitability is a significant challenge.
Automating the collections process can help your law firm create a more efficient workflow, while freeing up your billable time.
What is Accounts Receivable Automation?
The process of automated accounts receivable collections takes place via technological tools, such as accounts receivable automation software. MyCase billing and invoicing software, for example, improves the collections process by providing your firm with the following.
- Sending invoice reminders automatically, so you don’t have to follow up with every client to receive payment
- Applying late fees automatically, if desired
- Notifying your team whenever a client views or acts upon an invoice
- Providing an overview of accounts receivable and invoice statuses
The result is a substantial amount of billable time saved. More than 60% of lawyer respondents said that they save one to 15+ hours per month using legal billing and invoicing software, according to our 2021 Industry Report.
Best Practices for Accounts Receivable Management
After integrating an automated accounts receviable system into your firm, use the following best practices for collecting accounts receivables to increase your utilization rate and realization rate.
1. Be Clear About Fees
The best way to prevent unpaid bills is to clarify your fees upfront. Clients who know what to expect are more likely to commit to paying for your services. During your first meeting with clients, discuss the engagement fees to set expectations. Also, address any billing questions or concerns throughout your relationship.
Tip: Find out where to place your fees using our average hourly rate tool. We’ve calculated the hourly rates charged by lawyers who use MyCase, broken down by practice area and geographic location.
2. Track Time Accurately
Accurate bills start with proper timekeeping, so your firm’s time-tracking software should integrate with your billing and invoicing technology. With MyCase time-tracking software, you can keep track of billable or non-billable time spent—for flat fee and pro bono cases. You’ll be able to start and stop timers as you work, so you don’t have to recall time retroactively—improving your team’s utitlization rate.
3. Have Clear and Informative Billing Statements
Itemized bills keep clients informed and ensure that all work spent on cases is logged into invoices. They may also keep you in compliance; some bar associations require that law firms make itemized bills available to clients in certain situations.
With MyCase, you can easily create itemized bills. For example, when your team members craft descriptions for each task as they occur (along with billable hour time entries), the accounts receivable automation software will automatically insert this information as line items once it’s time to invoice. You can also edit or add hours and descriptions as needed. In addition, you can associate team members and billable rates with various tasks to produce a comprehensive list of services and associated costs.
Want to include expenses and trust account transactions right on the invoice? No problem. MyCase allows you to insert these items with just a few clicks of your mouse. And by accepting digital payments through the MyCase-LawPay integration, you can improve your law firm accounts receivable management with the convenience of these payment options.
Tip: For more information, check out our article about attorney billing statements. It describes the features every legal invoice should have and explains how to create detailed bills easily. It even includes a sample attorney billing statement your firm can use.
4. Send Out Invoices Consistently
One of the tried and true best practices for collecting accounts receivables is consistent invoicing. If your firm bills on a predictable basis, such as the first of every month, then clients know when to expect them.
When scheduling invoices, consider your clients’ preferred bill delivery methods. For example, MyCase enables your team to send invoices and reminders via:
- The secure MyCase Client Portal
- Text message
- U.S. mail
Afterward, utilize financial software for an overview of all accounts receivable debt owed to your firm. With a holistic overview of your firm’s performance and growth, you’re empowered to be proactive rather than reactive.
5. Offer Multiple Ways to Pay
Accepting various forms of payment can improve your firm’s collection speed and realization rate. And with legal payments software, offering multiple ways to pay doesn’t have to be an administrative nightmare.
According to our 2021 Industry Report, half of lawyer survey respondents claimed that accepting online credit card payments reduced the turnaround time for receiving consultation fees. In that group, 13% stated they received payments more than five days in advance.
With LawPay, our sister company under AffiniPay, your firm can accept debit and credit cards, eChecks, and electronic payments while complying with ABA and IOLTA guidelines. LawPay serves more than 50,000 law firms around the U.S. and integrates seamlessly with MyCase. This makes accounts receivable management accessible for firms of all sizes, including solo practitioners and small and medium teams.
Tip: MyCase customers who sign up for LawPay will pay no monthly fees on this additional service for the life of the account. Get your 10-day free trial of MyCase and see how a combined legal practice management plus payments solution can increase firm productivity.
6. Get Help From Legal Software
When you’re busy serving clients, the last thing you want to do is stop to handle online billing and other administrative work. An accounts receivable automation solution prevents you from deciding between doing client work right now or making sure you get paid for work already completed. In addition, implementing legal software that allows you to automate accounts receivable minimizes the possibility of human error, such as inaccurate invoices, duplicate entries, and overpayment.
Still not sure that an accounts receivable automation solution is right for your firm? Consider the following questions.
- Do you struggle to collect payments? Are many of your accounts receivables past due on a regular basis?
- Does your team spend several hours every week reminding clients about invoices and reconciling transactions?
- Is cash flow a challenge? Would your firm benefit from getting paid faster?
- Do you wish you had greater real-time oversight of accounts receivable and cash flow?
If you answered yes to any of the questions above, an automated accounts receivable collections process could improve your firm’s financial benchmarks while allowing your team to perform more billable work.
Growing Firms Need Accounts Receivable Automation
Law firm profitability and growth depend upon the ability to collect accounts receivable consistently. For modern firms, that means an automated accounts receivable system, such as MyCase legal invoicing software.
We specialize in legal practice management software, including accounts receivable tools. More than 64,000 law firms trust MyCase and LawPay to track time, generate ready-to-send invoices, send automated reminders, accept payments, and crunch analytics.
Try law firm accounts receivable management at its best. Start your free 10-day trial of MyCase today (there’s no credit card needed).
